Our examination of fiscal consequences focuses on the cost of borrowing to
finance CMI programs, and the effect of that borrowing on the state's debt load.

Overall, the Legislature appropriated nearly $389 million for CMI programs
between fiscal 1999 and 2001. Not all the funds have actually been spent, as
dozens of projects are in various stages of completion. But an appropriation
effectively reserves bond proceeds for designated uses.

The sale of general obligation bonds inflates by 60 percent the total cost of
the initiative. To date, three CMI bond series have been issued to raise
$153,620,000. But in addition to repaying this $153 million in principal, the
state also owes bondholders an additional $91,234,136 in interest. Legal
and administrative services related to the three bond issues cost an additional
$346,000. Thus, the state must repay about $1.60 for every dollar spent on CMI
projects.

The borrowed funds augment General Fund appropriations for conservation,
environment, recreation and agriculture programs, which have increased 42
percent in the past decade, from $358 million in fiscal 1991 to $618 million in
fiscal 2001. [17]

Determining whether bond debt is a fiscally sound method of financing
environmental protection is a complex calculation. Borrowing may be sensible if
the consequences of not doing so will prove more onerous than the resulting debt
service. But just as with personal finances, borrowing can be simply a way to
avoid spending discipline.

In evaluating whether bond sales are warranted, account must be taken of
whether all General Fund monies are already being spent on more pressing
matters. That is, the added costs of bond sales would be unjustified if general
tax revenues that do not carry debt service are being spent for subordinate
purposes.

In the case of the Clean Michigan Initiative, this heavier debt load does not
appear justified in that a substantial portion of the money is reserved for
commercial, recreational and aesthetic improvements that will yield relatively
minor environmental benefits.

Michigan's debt load has increased substantially in the past decade. Between
1991 and 2001, for example, the ratio of general obligation bond debt to total
General Fund expenditures doubled. Per-capita bond debt rose 59 percent in the
same period. Meanwhile, Michigan's per-capita debt load relative to other states
has worsened considerably in recent years. The state ranked 36th nationally in
state debt per capita in both 1980 and 1990, but had jumped to 24th by 1997. [18]

The high cost of CMI borrowing has worried some lawmakers. "It's like
paying rent with a credit card," said State Rep. Paul Gieleghem, D-Clinton
Township. [19]

These added debt costs are all the more questionable given the substantial
gains in environmental quality already achieved at substantial cost over the
past three decades. Billions of dollars worth of new technologies already have
dramatically reduced industrial and automotive emissions. Carbon monoxide
concentrations have been reduced 57 percent; lead 94 percent; sulfur dioxide 50
percent; and nitrogen dioxide 25 percent. Forestland, too, is flourishing, now
covering 44 percent of the state. The rate of wetland loss is in decline. [20]

Great Lakes wildlife, meanwhile, is thriving, indicating healthier waters.
Wild trout have rebounded, with hatchery stocks comprising less than 20 percent
of the trout population in Lake Superior. The bald eagle population has
increased from just 50 nests in 1961 to 366 in 2000. [21]

All the good news forces environmental activists and their regulatory allies
to target increasingly marginal environmental problems that cost far more to
address.

We next examine whether CMI objectives are realistic and to what extent the
funds allocated to date have achieved these objectives.